Sunstone Financial Group, Inc.
207 East Buffalo Street
Suite 400
Milwaukee, WI 53202
(414) 271-5885
November 20, 1996
Securities and Exchange Commission
450 Fifth Street, N.W.
Judiciary Plaza
Washington, D.C. 20549
Re: First Omaha Funds,Inc. Semi-Annual Report
Filing Pursuant to Rule 30b2-1 and Section 24(b)
under the Investment Company Act of 1940
File Nos. 811-8846; 33-85982
Dear Sir/Madam:
On behalf of First Omaha Funds, Inc. (the "Funds"), transmitted herewith
for filing pursuant to Rule 30b2-1 and Section 24(b) under the Investment
Company Act of 1940, as amended, is the Funds' Semi-Annual Report to
Shareholders for the six months ended September 30, 1996.
Questions regarding this filing should be directed to the undersigned.
Sincerely,
/s/ Richard P. Snyder
- ---------------------
Richard P. Snyder
Client Services & Accounting Manager
RPS/sl
Encl.
c: Donald F. Burt
SEMI-ANNUAL REPORT
SEPTEMBER 30, 1996
FIRST OMAHA
FAMILY OF FUNDS
FIRST NATIONAL BANK OF OMAHA - ADVISER
NOTICE TO INVESTORS
Shares of the First Omaha Funds are:
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
The U.S. Government Obligations Fund is not insured or guaranteed by the U.S.
government, nor can there can be any assurance that the Fund will be able to
maintain a stable net asset value of $1.00 per share.
The First Omaha Funds are distributed by Sunstone Financial Group, Inc.
DEAR SHAREHOLDER: October 1996
We are pleased to provide you with the First Omaha Family of Funds' Semi-Annual
Report for the period ended September 30, 1996. It contains financial
information about all of our Funds, including our two new Funds. The First Omaha
Small Cap Value Fund and the First Omaha Balanced Fund commenced operations this
summer and we believe they add new dimensions to our diversified portfolio of
investments. Please read this Semi-Annual Report carefully and retain it with
your Prospectus for future reference.
Once again, thank you for your investment in the First Omaha Family of Funds.
THE STOCK MARKET OUTLOOK
- ------------------------
The stock market has continued to advance over the past six months. An
environment of modest economic growth, low inflation and stable interest rates
provided an exceptional environment for the stock market. As a result, the
period from January 1, 1995 through September 30, 1996 has proved to be a
rather spectacular period. The Standard & Poor's Composite 500 ("S&P 500")
provided a total return of over 37% in 1995 and has tacked on another 13% in
1996 through the end of the third quarter of 1996 - appreciation of about 50% in
21 months. The 1995 total return was the highest calendar year return for the
S&P 500 in 37 years. This market advance as measured by the S&P 500 has
continued for over five years without a correction of more than 10%.
Even more remarkable is that this 21-month period extends a bull market that was
already almost 13 years old. Since 1982 the stock market has rather consistently
climbed higher with the exception of a modest negative total return in 1990. The
crash of October 1987 is hardly noticeable when viewed in the context of the
long-term trend. While the decline was abrupt, it followed a period of very
strong performance early in 1987, and the total return for the S&P 500 for the
full year was positive. The primary factors that have driven the stock market
throughout the 1980s and into the 1990s are, for the most part, behind us. We
believe a defensive posture and stock selection most likely will be the key to
performance in the late stages of this bull market.
FIRST OMAHA SMALL CAP VALUE FUND
- --------------------------------
The First Omaha Small Cap Value Fund's commencement date was June 10, 1996;
therefore, September 30, 1996 represents the Fund's first full quarter of
performance. The quarter was a volatile one, and was probably more
representative of small cap markets and investing than not. The market's
gyrations confirm characteristics of small cap investing. Small cap stocks can
be more volatile than the overall market.
We believe small cap stocks could enjoy an advantage in the environment as we
perceive it. Small cap earnings have held up well in this cycle, and small cap
stocks currently have attractive relative valuations. Unlike the large companies
for whom cost cutting provided opportunities for significant margin improvement,
small companies have largely depended on unit growth. We believe the ability to
produce unit growth given the constraints for further margin improvement could
prove to be a significant advantage going forward in the small cap arena.
THE PORTFOLIO
At the end of June, the Small Cap Value Fund was 82% invested in equities, and
27 stock positions had been established. The balance of the portfolio was
invested in cash and cash equivalents. At the end of September, the portfolio
was 83% invested in equities.
The attractiveness of the portfolio is demonstrated by the weighted average
Valuation Profile and the weighted average Fundamental Profile in the following
tables.
PORTFOLIO VALUATION PROFILE
as of September 30, 1996
WEIGHTED
AVERAGE S&P 600
-------- -------
Price/Earnings* 14.5x 31.0x
Price/Book Value* 2.25x N/A
Yield 2.9% 0.9%
*Based on 1997 estimates
PORTFOLIO FUNDAMENTAL PROFILE
as of September 30, 1996
WEIGHTED
AVERAGE S&P 600
-------- -------
Payout Ratio* 41.1% N/A
Debt/Capital* 23.0% N/A
ROE 18.1% N/A
*Based on 1997 estimates
See a description of the S&P SmallCap 600 Index ("S&P 600") below the chart
that follows.
PAYOUT RATIO is a ratio used to analyze a company's policy of paying cash
dividends, calculated by dividing the dividends paid on common stock by the net
income available for common stockholders. DEBT/CAPITAL is the ratio of total
debt to total stockholder's equity. ROE (RETURN ON EQUITY) equals earnings
available to common stock divided by common shareholder's equity.
This profile is in line with the Fund's investment philosophy. The companies
represented in the portfolio have solid balance sheets, have been good cash flow
generators and represent perceived long-term intrinsic value.
The five largest positions at the end of September represented 25% of the stocks
in the portfolio, and included CLARCOR, Inc., Dean Foods Co., Tambrands, Inc.,
Guarantee Life Cos. and Nash-Finch Co. All of these companies exemplify the
style of investing represented by the Fund. The Fund is well diversified across
the major industry sectors.
In closing, one quarter is not long enough to judge performance on a fund with a
long-term strategy, but we believe the S&P MidCap 400 and the S&P SmallCap 600
are appropriate comparisons for measuring the Small Cap Value Fund over longer
periods of time.
CUMULATIVE SINCE
COMMENCEMENT<F1>
-----------------
FIRST OMAHA SMALL CAP VALUE Fund (1.20)%
<F1> Commencement date is 6/10/96
RETURN ON A $10,000 INVESTMENT
- ------------------------------
JUNE 10, SEPT.
1996 1996
-------- -------
FIRST OMAHA SMALL CAP VALUE FUND $10,000 $ 9,880
S&P MIDCAP 400 INDEX $10,000 $10,133
S&P SMALLCAP 600 INDEX $10,000 $ 9,978
This chart assumes an initial investment of $10,000 made on 6/10/96. Total
Return is based on net change in N.A.V. assuming reinvestment of distributions.
Returns shown on this page include the reinvestment of all dividends and other
distributions. Performance figures reflect fee waivers in effect, represent past
performance, which is no guarantee of future results, and will fluctuate. In the
absence of fee waivers, total return would be reduced. The investment return and
principal value of an investment in the First Omaha Small Cap Value Fund will
fluctuate so that an investor's shares in the Fund, when redeemed, may be worth
more or less than their original cost. The investment adviser of the Fund is
First National Bank of Omaha.
The S&P MidCap 400 Index consists of 400 domestic stocks chosen for market size,
liquidity, and industry group representation. It is also a market-value weighted
index and was the first benchmark of midcap stock price movement.
The S&P SmallCap 600 Index consists of 600 domestic stocks chosen for market
size, liquidity, (bid-asked spread, ownership, share turnover and number of no
trade days) and industry group representation. It too is a market-value weighted
index.
FIRST OMAHA EQUITY FUND
- -----------------------
In March, the Fund established a position in Bristol-Myers Squibb Co. (3% of the
Fund as of September 30, 1996). Bristol-Myers manufactures widely recognized
products including Bufferin, Clairol and Enfamil. The company is very strong
financially, has consistently earned a return on equity that is well above
average and we believe has strong growth prospects. The stock was selling at 14x
the 1997 earnings estimate and was yielding 3.5% when it was purchased. As of
September 30, 1996, the valuation was higher.
The Fund also established a position in Cyprus Amax Minerals Co. (3% of the Fund
as of September 30, 1996). Cyprus is a diversified mining company that produces
copper, molybdenum, coal, lithium and gold. Copper, and its by-product
molybdenum, contributed about 80% of 1995's operating profits. While the price
of copper has been quite volatile over the past year, Cyprus has continued to
invest opportunistically in assets and has committed significant capital
expenditures to reduce its cost of production. While the price of copper may not
increase in the near term, Cyprus should experience higher margins as a result
of its improved cost structure. In addition, Cyprus should benefit from
increasing cash flow and declining capital expenditure requirements. The stock
represents a good value at 10x the 1997 estimate, yielding 3.7%.
The positions in General Electric Co., Eli Lilly & Co. and Schlumberger, Ltd.
were all eliminated since March. Each of these companies are fundamentally
sound; however, the stock price of each reached a level that exceeded our
estimate of fair value. While it is often difficult to sell companies that one
considers to be better than average, we believe that it is key that we continue
to execute our discipline consistently in this market. The basis of our
philosophy is to invest in companies that have above average and sustainable or
sub-par but improving return on equity, strong balance sheets, strong market
positions and effective managements that have a demonstrated ability to
effectively allocate cash flows to maximize shareholder value. Second, but not
of less importance, we buy and own stocks that we believe are selling below
their intrinsic value. A stock that falls short on any of these requirements is
a candidate for sale.
THE PORTFOLIO
The Equity Fund's portfolio is conservatively invested primarily in large
companies we believe to be of high quality. These companies, on a weighted
average basis, are as strong fundamentally as the S&P Industrials Average and
have lower valuation measures. The tables below present relevant fundamental and
valuation measures.
PORTFOLIO VALUATION PROFILE
as of September 30, 1996
S&P
WEIGHTED INDUSTRIALS
AVERAGE AVERAGE
--------- ----------
PRICE/EARNINGS* 14X 18X
PRICE/BOOK VALUE* 3.1X 3.5X
YIELD 2.9% 1.9%
*Based on 1997 estimates
PORTFOLIO FUNDAMENTAL PROFILE
as of September 30, 1996
S&P
WEIGHTED INDUSTRIALS
AVERAGE AVERAGE
--------- -----------
PAYOUT RATIO* 43% 36%
DEBT/CAPITAL* 33% 40%
ROE 22% 21%
*Based on 1997 estimates
See the definitions of the terms listed above on page 2.
On September 30, 1996, the portfolio was 81% invested in equities with the
balance of the portfolio invested in cash and cash equivalents. The equity
commitment declined slightly since March 31, 1996 when it stood at 82%. The
portfolio contained 30 stocks and remains well diversified with exposure to all
major sectors of the economy. The five largest holdings in the portfolio were:
Rite Aid Corp., Ingersoll-Rand Co., Honeywell, Inc., J.C. Penney Co., Inc. and
Tambrands, Inc. These stocks represented almost 19% of the value of the
portfolio and approximately 23% of the value of the equity commitment.
1 YEAR ENDED AVERAGE ANNUAL SINCE
9/30/96 COMMENCEMENT<F2>
------------ --------------------
FIRST OMAHA EQUITY FUND <F3> 14.74% 13.98%
<F2> Commencement date is 12/13/92
<F3> Performance data from commencement through April 9, 1995 relates to a
predecessor, First Omaha Equity Fund, the assets of which were acquired by
the Fund on that date.
RETURN ON A $10,000 INVESTMENT
DEC. 13, SEPT. SEPT. SEPT. SEPT.
1992 1993 1994 1995 1996
-------- ----- ---- ---- ----
FIRST OMAHA EQUITY FUND $10,000 $10,681 $11,724 $14,335 $16,448
S&P 500 COMPOSITE $10,000 $10,834 $11,232 $14,575 $17,538
This chart assumes an initial investment of $10,000 made on 12/13/92. Total
Return is based on net change in N.A.V. assuming reinvestment of distributions.
Returns shown on this page include the reinvestment of all dividends and other
distributions. Performance figures reflect fee waivers in effect, represent past
performance, which is no guarantee of future results, and will fluctuate. In the
absence of fee waivers, total return would be reduced. The investment return and
principal value of an investment in the First Omaha Equity Fund will fluctuate
so that an investor's shares in the Fund, when redeemed, may be worth more or
less than their original cost. The investment adviser of the Fund is First
National Bank of Omaha.
The S&P 500 Composite is an index of unmanaged groups of 500 selected common
stocks, most of which are listed on the New York Stock Exchange. The index is
heavily weighted toward stocks with large market capitalizations and represents
approximately two-thirds of the total market value of all domestic common
stocks. The returns for this index do not reflect any fees or expenses.
FIRST OMAHA BALANCED FUND
- -------------------------
The First Omaha Balanced Fund's commencement date was August 6, 1996.
The Balanced Fund's investment objective is a combination of capital
appreciation and current income. We will seek to achieve this objective through
two related processes of portfolio management. First, the portfolio will be
structured to achieve reasonable growth and income. Second, our emphasis on the
bond and stock selection processes will provide quality investments based on our
fundamental philosophy of buying securities that sell below their intrinsic
value.
PORTFOLIO ALLOCATION
Under normal market conditions, the Balanced Fund is expected to be allocated
approximately 65% in stocks and 35% in debt (bond) securities. However,
depending upon market conditions, the Balanced Fund may also be allocated to
cash equivalents. The range of allocation to stocks is expected to be between
35% and 65%. The Fund expects to invest a minimum of 25% of its total assets in
investment grade fixed income securities. Because we have a long-term investment
horizon (3-5 years), we focus on long-term results. The allocation is determined
on the relative attractiveness of each asset class using our long-term analyses.
Major short-term shifts, in our view, are attempts to time the market's price
change. We would rather forgo short-term price changes in favor of holding
investments we believe to be of higher quality with above average long-term
prospects.
SECURITY SELECTION STRATEGY
Our security selection strategy for the Balanced Fund will be similar to the
strategies used for the First Omaha Equity Fund and the First Omaha Fixed Income
Fund. For fixed income investments, we will focus on purchasing bonds with
above-average credit quality and issues with good market liquidity. Bonds will
be weighted in the portfolio in relation to their long-term relative values. The
average maturity of the bond portfolio will typically range between 7 and 10
years under normal market conditions. Stocks will be purchased using our value-
based fundamental quantitative and qualitative analyses. Our analysis will be
company-focused and we will invest in companies that have strong market
positions and a strong financial position. In addition, we will purchase
companies that have repeatedly demonstrated that they use shareholders' capital
effectively and produce improving or above average returns on the capital
employed within their businesses. It is our opinion that the combination of
these two approaches to security selection should provide a conservative
portfolio with satisfactory long-term returns.
THE PORTFOLIO
The asset mix of the portfolio at the quarter ending September 30, 1996
consisted of 35% bonds and 47% stocks. The composition of the bond portion of
the portfolio consisted of 33% high-quality corporate bonds and 67% government
notes. The average yield on the bond portfolio was 5.9%. The average maturity of
the bond portfolio was 8 years. The sector breakdown of the corporate portion of
the portfolio was evenly distributed between industrial bonds, telephone utility
bonds and electric utility bonds.
The dividend yield on the equity portion of the portfolio was 2.9% at the end of
the quarter, which compares favorably to the S&P 500 yield of 2.0%. The Fund
held 29 stock positions with the top five at the end of the quarter being J.C.
Penney Co., Inc., Ingersoll-Rand Co., Rite Aid Corp., American Financial Group,
Inc. and Motorola, Inc. This portfolio was diversified and constructed to
participate in most major sectors of the economy. These companies were
fundamentally stronger and financially above average when compared to the
overall market. We believe these characteristics, combined with an above average
dividend yield and the favorable valuation of the stock portfolio, should
provide additional downside protection for the portfolio in declining markets.
CUMULATIVE SINCE
COMMENCEMENT<F4>
----------------
FIRST OMAHA BALANCED FUND 1.05%
<F4> Commencement date is 8/6/96
RETURN ON A $10,000 INVESTMENT
AUG. 6, SEPT.
1996 1996
------ ----
FIRST OMAHA BALANCED FUND $10,000 $10,105
S&P 500 COMPOSITE $10,000 $10,431
LEHMAN BROS. GOV'T./CORP. BOND INDEX $10,000 $10,158
This chart assumes an initial investment of $10,000 made on 8/6/96. Total Return
is based on net change in N.A.V. assuming reinvestment of distributions. Returns
shown on this page include the reinvestment of all dividends and other
distributions. Performance figures reflect fee waivers in effect, represent past
performance, which is no guarantee of future results, and will fluctuate. In the
absence of fee waivers, total return would be reduced. The investment return and
principal value of an investment in the First Omaha Balanced Fund will fluctuate
so that an investor's shares in the Fund, when redeemed, may be worth more or
less than their original cost. The investment adviser of the Fund is First
National Bank of Omaha.
The S&P 500 Composite is an index of unmanaged groups of 500 selected common
stocks, most of which are listed on the New York Stock Exchange. The index is
heavily weighted toward stocks with large market capitalizations and represents
approximately two-thirds of the total market value of all domestic common
stocks. The returns for this index do not reflect any fees or expenses.
The Lehman Bros. Gov't./Corp. Bond Index includes all public obligations of the
U.S. Treasury, excluding flower bonds and foreign-targeted issues; all publicly
issued debt of U.S. government agencies and quasi-federal corporations, and
corporate debt guaranteed by the U.S. government; and all publicly issued, fixed
rate, nonconvertible, investment grade, dollar-denominated, SEC-registered
corporate debt (including debt issued or guaranteed by foreign sovereign
governments, municipalities, or governmental agencies, or international
agencies). The returns for this index do not reflect any fees or expenses.
THE BOND MARKET OUTLOOK
- -----------------------
The economy began showing signs of slowing during the third quarter of this
year, helping interest rates move lower. The Federal Reserve has not changed
short-term rates since last January. We believe it is waiting to see whether the
economy will slow down from the burst of growth we experienced during the first
half of 1996.
FIRST OMAHA FIXED INCOME FUND
- -----------------------------
As of September 30, 1996, the First Omaha Fixed Income Fund was conservatively
positioned with a diversified portfolio of government and corporate securities,
allocated at 29% and 67%, respectively. Within the corporate portion of the
portfolio, the majority of the securities were high-quality industrial and
utility bonds. Credit quality remains a primary investment consideration as we
try to achieve better-than-benchmark returns while exposing invested capital to
less interest rate and credit risk. Consequently, the portfolio had an average
maturity of 8.5 years and a weighted average credit rating of AA/Aa as of
September 30, 1996. It is expected that the Fund will continue to execute a
laddered maturity strategy, focusing on those sectors and maturities that appear
to offer the best value.
1 YEAR ENDED AVERAGE ANNUAL SINCE
9/30/96 COMMENCEMENT<F5>
------------ --------------------
FIRST OMAHA FIXED INCOME FUND<F6> 2.84% 6.15%
<F5> Commencement date is 12/13/92
<F6> Performance data from commencement through April 9, 1995 relates to a
predecessor, First Omaha Fixed Income Fund, the assets of which were
acquired by the Fund on that date.
RETURN ON A $10,000 INVESTMENT
DEC. 13, SEPT. SEPT. SEPT. SEPT.
1992 1993 1994 1995 1996
-------- ---- ---- ---- ----
FIRST OMAHA FIXED
INCOME FUND $10,000 $11,248 $10,803 $12,201 $12,319
LEHMAN BROS. GOV'T./CORP.
BOND INDEX $10,000 $11,255 $10,769 $12,337 $12,893
This chart assumes an initial investment of $10,000 made on 12/13/92. Total
Return is based on net change in N.A.V. assuming reinvestment of distributions.
Returns shown on this page include the reinvestment of all dividends and other
distributions. Performance figures reflect fee waivers in effect, represent past
performance, which is no guarantee of future results, and will fluctuate. In the
absence of fee waivers, total return would be reduced. The investment return and
principal value of an investment in the First Omaha Fixed Income Fund will
fluctuate so that an investor's shares in the Fund, when redeemed, may be worth
more or less than their original cost. The investment adviser of the Fund is
First National Bank of Omaha.
The Lehman Bros. Gov't./Corp. Bond Index includes all public obligations of the
U.S. Treasury, excluding flower bonds and foreign-targeted issues; all publicly
issued debt of U.S. government agencies and quasi-federal corporations, and
corporate debt guaranteed by the U.S. government; and all publicly issued, fixed
rate, nonconvertible, investment grade, dollar-denominated, SEC-registered
corporate debt (including debt issued or guaranteed by foreign sovereign
governments, municipalities, or governmental agencies, or international
agencies). The returns for this index do not reflect any fees or expenses.
FIRST OMAHA SHORT/INTERMEDIATE FIXED INCOME FUND
- ------------------------------------------------
As of September 30, 1996, the First Omaha Short/Intermediate Fixed Income Fund
was conservatively positioned with a diversified portfolio of government and
corporate securities, allocated at 22% and 75%, respectively. Within the
corporate portion of the portfolio, the majority of the securities were high-
quality industrial and utility bonds. Credit quality remains a primary
investment consideration as we try to achieve better-than-benchmark returns
while exposing invested capital to less interest rate and credit risk.
Consequently, the portfolio had an average maturity of 4 years and a weighted
average credit rating of AA/Aa as of September 30, 1996. It is expected that the
Fund will continue to execute a laddered maturity strategy, focusing on those
sectors and maturities that appear to offer the best value.
1 YEAR ENDED AVERAGE ANNUAL SINCE
9/30/96 COMMENCEMENT<F7>
------------ --------------------
FIRST OMAHA SHORT/INTERMEDIATE
FIXED INCOME FUND<F8> 4.13% 4.98%
<F7> Commencement date is 12/13/92
<F8> Performance data from commencement through April 9, 1995 relates to a
predecessor, First Omaha Short/Intermediate Fixed Income Fund, the assets
of which were acquired by the Fund on that date.
RETURN ON A $10,000 INVESTMENT
- ------------------------------
DEC. 13, SEPT. SEPT. SEPT. SEPT.
1992 1993 1994 1995 1996
------- ----- ----- ----- -----
FIRST OMAHA SHORT/INTERMEDIATE
FIXED INCOME FUND $10,000 $10,698 $10,535 $11,552 $12,029
LEHMAN BROS. MUTUAL FUND
SHORT (1-5) U.S.
GOV'T. INDEX $10,000 $10,710 $10,690 $11,886 $12,326
This chart assumes an initial investment of $10,000 made on 12/13/92. Total
Return is based on net change in N.A.V. assuming reinvestment of distributions.
Returns shown on this page include the reinvestment of all dividends and other
distributions. Performance figures reflect fee waivers in effect, represent past
performance, which is no guarantee of future results, and will fluctuate. In the
absence of fee waivers, total return would be reduced. The investment return and
principal value of an investment in the First Omaha Short/Intermediate Fixed
Income Fund will fluctuate so that an investor's shares in the Fund, when
redeemed, may be worth more or less than their original cost. The investment
adviser of the Fund is First National Bank of Omaha.
The Lehman Bros. Mutual Fund Short (1-5) U.S. Government Index is an index made
up of the Treasury Bond Index (all public obligations of the U.S. Treasury,
excluding flower bonds and foreign-targeted issues) and the Agency Bond Index
(all publicly issued debt of U.S. government agencies and quasi-federal
corporations, and corporate debt guaranteed by the U.S. government). It includes
only those bonds with maturities of up to five years. The returns for this index
do not reflect any fees or expenses.
<TABLE>
STATEMENTS OF ASSETS AND LIABILITIES
September 30, 1996
<CAPTION>
SHORT/ U.S.
SMALL CAP FIXED INTERMEDIATE GOVERNMENT
VALUE EQUITY BALANCED INCOME FIXED INCOME OBLIGATIONS
FUND FUND FUND FUND FUND FUND
---------- ------- -------- ------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments, at market value (cost $2,850,854,
$204,773,098, $2,535,425, $77,592,414,
$21,097,702 and $79,064,259, respectively) $2,839,295 $240,414,661 $2,551,248 $77,340,852 $20,938,526 $79,064,259
Repurchase agreements, at market value (cost
$0, $0, $0, $0, $0 and $33,716,010, respectively) - - - - - 33,716,010
Interest and dividends receivable 3,597 207,106 13,004 1,095,212 322,246 35,484
Organizational expenses, net of
accumulated amortization 9,019 24,495 4,433 24,495 24,495 24,495
Other assets 8,782 56,948 11,670 25,220 12,539 29,450
---------- ----------- --------- ---------- ---------- ------------
Total Assets 2,860,693 240,703,210 2,580,355 78,485,779 21,297,806 112,869,698
---------- ----------- --------- ---------- ---------- ------------
LIABILITIES:
Dividend payable - - - - - 403,102
Accrued expenses and other liabilities 4,702 42,980 2,676 22,379 15,547 32,762
Accrued investment advisory fee - 36,173 - 8,618 1,872 21,476
---------- ----------- --------- ---------- ---------- ------------
Total Liabilities 4,702 79,153 2,676 30,997 17,419 457,340
---------- ----------- --------- ---------- ---------- ------------
NET ASSETS $2,855,991 $240,624,057 $2,577,679 $78,454,782 $21,280,387 $112,412,358
========== =========== ========= ========== ========== ===========
NET ASSETS CONSIST OF:
Capital stock 3 176 3 79 22 1,124
Paid-in-capital in excess of par 2,869,152 188,731,491 2,560,859 78,929,079 21,761,296 112,424,292
Undistributed net investment income (1,605) 50,748 994 102,615 22,224 2,980
Undistributed net realized gain (loss)
on investments - 16,200,079 - (325,429) (343,979) (16,038)
Net unrealized appreciation (depreciation)
on investments (11,559) 35,641,563 15,823 (251,562) (159,176) -
---------- ----------- --------- ---------- ---------- ------------
Net Assets $2,855,991 $240,624,057 $2,577,679 $78,454,782 $21,280,387 $112,412,358
========== =========== ========= ========== ========== ===========
CAPITAL STOCK, $0.00001 PAR VALUE
Authorized 50,000,000 50,000,000 50,000,000 50,000,000 50,000,000 300,000,000
Issued and outstanding 290,622 17,640,294 256,325 7,932,233 2,174,944 112,428,309
NET ASSET VALUE, REDEMPTION PRICE,
AND OFFERING PRICE PER SHARE
(NET ASSET/SHARES OUTSTANDING) $9.83 $13.64 $10.06 $9.89 $9.78 $1.00
===== ====== ====== ===== ===== =====
See notes to financial statements.
</TABLE>
SCHEDULE OF PORTFOLIO INVESTMENTS
September 30, 1996 (Unaudited)
SMALL CAP VALUE FUND
NUMBER
OF SHARES VALUE
---------- -------
COMMON STOCKS 82.80%
BUILDING MATERIALS 3.06%
2,500 Apogee Enterprises, Inc. $ 87,500
----------
BUSINESS SERVICES 2.10%
3,200 Franklin Quest Co. <F9> 60,000
----------
CHEMICALS 9.29%
2,900 Dexter Corp. 86,638
6,100 Oil-Dri Corp. of America 84,637
2,000 WD-40 Co. 94,000
----------
265,275
----------
COSMETICS 4.28%
2,900 Tambrands, Inc. 122,162
----------
ELECTRONICS 2.61%
1,500 Teleflex, Inc. 74,438
----------
ENVIRONMENTAL CONTROL 4.20%
6,100 Calgon Carbon Corp. 63,288
5,800 Isco, Inc. 56,550
----------
119,838
----------
FOOD 8.09%
4,500 Dean Foods Co. 127,125
6,500 Nash-Finch Co. 104,000
----------
231,125
----------
HOME FURNISHINGS 3.29%
2,500 National Presto Industries, Inc. 94,062
----------
INSURANCE 7.47%
3,300 American Financial Group, Inc. 103,950
5,500 Guarantee Life Companies, Inc. 109,313
----------
213,263
----------
MACHINERY & EQUIPMENT 8.60%
4,400 Lawson Products, Inc. 96,250
2,800 Modine Manufacturing Co. 73,500
1,400 Tecumseh Products Co., Class A 75,950
----------
245,700
----------
MANUFACTURING 2.74%
3,400 Tennant Co. $ 78,200
----------
METAL PRODUCTS 2.63%
3,900 Amcast Industrial Corp. 75,075
----------
MINING 3.50%
2,500 Cleveland-Cliffs, Inc. 100,000
----------
MOTOR VEHICLE PARTS & ACCESSORIES 4.83%
6,300 CLARCOR, Inc. 137,813
----------
TEXTILE MANUFACTURING 3.20%
5,500 Kellwood Co. 91,437
----------
TIRE & RUBBER 2.42%
1,400 Bandag, Inc. 69,125
----------
TOBACCO 2.50%
2,800 Universal Corp. 71,400
----------
TRUCKING LEASING 2.77%
4,950 Werner Enterprises, Inc. 79,200
----------
UTILITIES - ELECTRIC SERVICES 2.46%
3,000 DPL, Inc. 70,125
----------
UTILITIES - TELECOMMUNICATIONS 2.76%
5,000 Aliant Communication, Inc. 78,750
----------
Total Common Stocks (cost $2,376,130) 2,364,488
----------
PRINCIPAL
AMOUNT
----------
U.S. TREASURY BILLS 10.33%
$300,000 1/23/97 295,093
----------
Total U.S. Treasury Bills (cost $295,010) 295,093
----------
NUMBER
OF SHARES VALUE
---------- -------
INVESTMENT COMPANIES 6.29%
50,000 Federated Treasury Obligations Fund $ 50,000
129,714 Goldman Sachs ILA Treasury
Obligations Portfolio 129,714
----------
Total Investment Companies (cost $179,714) 179,714
----------
Total Investments (cost $2,850,854) 99.42% 2,839,295
Other Assets, less Liabilities 0.58% 16,696
----------
NET ASSETS 100.00% $2,855,991
==========
<F9> Non-income producing security
See notes to financial statements.
SCHEDULE OF PORTFOLIO INVESTMENTS
September 30, 1996 (Unaudited)
EQUITY FUND
NUMBER
OF SHARES VALUE
---------- -------
COMMON STOCKS 80.74%
COMMUNICATIONS EQUIPMENT 2.79%
129,900 Motorola, Inc. $ 6,706,087
----------
COMPUTERS & PERIPHERALS 2.62%
50,600 International Business Machines Corp. 6,299,700
----------
COSMETICS 3.89%
38,500 International Flavors & Fragrances, Inc. 1,679,563
182,500 Tambrands, Inc. 7,687,812
----------
9,367,375
----------
ELECTRICAL EQUIPMENT 5.89%
60,700 Emerson Electric Co. 5,470,588
137,800 Honeywell, Inc. 8,698,625
----------
14,169,213
----------
ENVIRONMENTAL CONTROL 0.71%
165,600 Calgon Carbon Corp. 1,718,100
----------
FOOD PROCESSING & PACKAGING 2.94%
94,400 CPC International, Inc. 7,068,200
----------
HEAVY MACHINERY 3.78%
191,500 Ingersoll-Rand Co. 9,096,250
----------
INSURANCE 10.51%
241,600 American Financial Group, Inc. 7,610,400
147,900 American General Corp. 5,583,225
62,600 Marsh & McLennan Cos., Inc. 6,080,025
172,000 SAFECO Corp. 6,020,000
----------
25,293,650
----------
MEDICAL SUPPLIES 2.31%
125,800 Becton, Dickinson & Co. 5,566,650
----------
MINING 2.95%
330,000 Cyprus Amax Minerals Co. 7,095,000
----------
MOTOR VEHICLE PARTS & ACCESSORIES 1.53%
168,200 CLARCOR, Inc. 3,679,375
----------
OIL 7.80%
72,300 Exxon Corp. $ 6,018,975
63,900 Texaco, Inc. 5,878,800
190,700 Unocal Corp. 6,865,200
----------
18,762,975
----------
PACKAGING & CONTAINERS 2.71%
237,300 Sonoco Products Co. 6,525,750
----------
PHARMACEUTICALS 3.15%
78,500 Bristol-Myers Squibb Co. 7,565,437
----------
PHOTOGRAPHY 3.05%
93,500 Eastman Kodak Co. 7,339,750
----------
PUBLISHING 2.64%
197,100 R.R. Donnelley & Sons Co. 6,356,475
----------
RETAIL 8.18%
160,600 J.C. Penney Co., Inc. 8,692,475
303,000 Rite Aid Corp. 10,983,750
----------
19,676,225
----------
SOAPS & CLEANING AGENTS 2.51%
69,600 Colgate-Palmolive Co. 6,046,500
----------
TEXTILE MANUFACTURING 2.72%
393,300 Kellwood Co. 6,538,613
----------
TOBACCO 3.02%
285,200 Universal Corp. 7,272,600
----------
UTILITIES - ELECTRIC SERVICES 5.04%
256,900 DPL, Inc. 6,005,038
154,500 Texas Utilities Co. 6,122,062
----------
12,127,100
----------
Total Common Stocks (cost $158,641,597) 194,271,025
-----------
PRINCIPAL
AMOUNT VALUE
--------- -----
U.S. TREASURY BILLS 18.00%
$8,000,000 11/29/96 $ 7,933,999
2,000,000 12/5/96 1,981,830
8,000,000 1/2/97 7,895,346
5,000,000 1/16/97 4,923,950
8,000,000 1/23/97 7,869,155
5,000,000 1/30/97 4,914,430
8,000,000 3/20/97 7,805,060
-----------
Total U.S. Treasury Bills (cost $43,311,635) 43,323,770
-----------
NUMBER
OF SHARES
----------
INVESTMENT COMPANIES 1.17%
2,819,866 Goldman Sachs ILA Treasury
Obligations Portfolio 2,819,866
-----------
Total Investment Companies (cost $2,819,866) 2,819,866
-----------
Total Investments (cost $204,773,098) 99.91% 240,414,661
Other Assets, less Liabilities 0.09% 209,396
-----------
NET ASSETS 100.00% $240,624,057
===========
See notes to financial statements.
SCHEDULE OF PORTFOLIO INVESTMENTS
September 30, 1996 (Unaudited)
BALANCED FUND
NUMBER
OF SHARES VALUE
---------- -------
COMMON STOCKS 46.67%
COMMUNICATIONS EQUIPMENT 2.00%
1,000 Motorola, Inc. $ 51,625
-----------
COMPUTERS & PERIPHERALS 1.45%
300 International Business Machines Corp. 37,350
-----------
COSMETICS 2.30%
200 International Flavors & Fragrances, Inc. 8,725
1,200 Tambrands, Inc. 50,550
-----------
59,275
-----------
ELECTRICAL EQUIPMENT 1.72%
700 Honeywell, Inc. 44,187
-----------
ENVIRONMENTAL CONTROL 0.60%
1,500 Calgon Carbon Corp. 15,563
-----------
FOOD PROCESSING & PACKAGING 1.74%
600 CPC International, Inc. 44,925
-----------
HEAVY MACHINERY 2.21%
1,200 Ingersoll-Rand Co. 57,000
-----------
INSURANCE 6.69%
1,700 American Financial Group, Inc. 53,550
1,100 American General Corp. 41,525
400 Marsh & McLennan Cos., Inc. 38,850
1,100 SAFECO Corp. 38,500
-----------
172,425
-----------
MEDICAL SUPPLIES 1.03%
600 Becton, Dickinson & Co. 26,550
-----------
MINING 1.92%
2,300 Cyprus Amax Minerals Co. 49,450
-----------
MOTOR VEHICLE PARTS & ACCESSORIES 1.10%
1,300 CLARCOR, Inc. 28,438
-----------
OIL 4.72%
500 Exxon Corp. 41,625
400 Texaco, Inc. 36,800
1,200 Unocal Corp. 43,200
-----------
121,625
-----------
PACKAGING & CONTAINERS 1.60%
1,500 Sonoco Products Co. $ 41,250
-----------
PHARMACEUTICALS 1.87%
500 Bristol-Myers Squibb Co. 48,187
-----------
PHOTOGRAPHY 1.52%
500 Eastman Kodak Co. 39,250
-----------
PUBLISHING 1.50%
1,200 R.R. Donnelley & Sons Co. 38,700
-----------
RETAIL 4.42%
1,100 J.C. Penney Co., Inc. 59,537
1,500 Rite Aid Corp. 54,375
-----------
113,912
-----------
SOAPS & CLEANING AGENTS 1.69%
500 Colgate-Palmolive Co. 43,438
-----------
TEXTILE MANUFACTURING 1.55%
2,400 Kellwood Co. 39,900
-----------
TOBACCO 1.78%
1,800 Universal Corp. 45,900
-----------
UTILITIES - ELECTRIC SERVICES 3.26%
1,900 DPL, Inc. 44,412
1,000 Texas Utilities Co. 39,625
-----------
84,037
-----------
Total Common Stocks (cost $1,178,180) 1,202,987
-----------
PRINCIPAL
AMOUNT
---------
CORPORATE BONDS 11.27%
FOOD PRODUCTS 3.83%
$100,000 Anheuser-Busch Cos., Inc.,
6.75%, 8/1/03 98,875
-----------
UTILITIES - ELECTRIC SERVICES 3.94%
100,000 Indianapolis Power & Light Co.,
7.375%, 8/1/07 101,500
-----------
PRINCIPAL
AMOUNT VALUE
---------- -----
UTILITIES - TELECOMMUNICATIONS 3.50%
$100,000 BellSouth Telecommunications, Inc.,
5.875%, 1/15/09 $ 90,125
-----------
Total Corporate Bonds (cost $291,393) 290,500
-----------
U.S. TREASURY BILLS 14.65%
380,000 11/14/96 377,663
-----------
Total U.S. Treasury Bills (cost $377,671) 377,663
-----------
U.S. TREASURY NOTES 19.47%
100,000 5.375%, 11/30/97 99,398
100,000 6.75%, 5/31/99 101,174
100,000 6.625%, 6/30/01 100,548
100,000 6.50%, 8/15/05 98,670
100,000 7.00%, 7/15/06 102,052
-----------
Total U.S. Treasury Notes (cost $506,374) 501,842
-----------
U.S. TREASURY STRIPS 3.76%
285,000 2/15/12 97,079
-----------
Total U.S. Treasury Strips (cost $100,630) 97,079
-----------
NUMBER
OF SHARES
----------
INVESTMENT COMPANIES 3.15%
50,000 Federated Treasury Obligations Fund 50,000
31,177 Goldman Sachs ILA Treasury
Obligations Portfolio 31,177
-----------
Total Investment Companies (cost $81,177) 81,177
-----------
Total Investments (cost $2,535,425) 98.97% 2,551,248
Other Assets, less Liabilities 1.03% 26,431
-----------
NET ASSETS 100.00% $2,577,679
===========
See notes to financial statements.
SCHEDULE OF PORTFOLIO INVESTMENTS
September 30, 1996 (Unaudited)
FIXED INCOME
PRINCIPAL
AMOUNT VALUE
---------- -----
CORPORATE BONDS 68.20%
COMMUNICATIONS EQUIPMENT 3.03%
$2,500,000 Motorola, Inc.,
6.50%, 3/1/08 $ 2,378,125
-----------
ELECTRICAL EQUIPMENT 2.99%
2,500,000 General Electric Co.,
5.50%, 11/1/01 2,346,875
-----------
FOOD PRODUCTS 3.08%
2,500,000 Anheuser-Busch Cos., Inc.,
7.25%, 9/15/15 2,415,625
-----------
FOREST PRODUCTS 2.93%
2,500,000 Kimberly-Clark Corp.,
6.875%, 2/15/14 2,296,875
-----------
GOVERNMENTS - FOREIGN 2.54%
2,000,000 Ontario Hydro,
5.80%, 3/31/98 1,990,000
-----------
INDUSTRIAL GOODS & SERVICES 8.47%
2,000,000 Air Products & Chemicals, Inc.,
6.25%, 6/15/03 1,910,000
2,335,000 Monsanto Co.,
6.00%, 7/1/00 2,276,625
2,500,000 PPG Industries, Inc.,
7.375%, 6/1/16 2,462,500
-----------
6,649,125
-----------
OIL & GAS EXPLORATION & PRODUCTION 3.81%
2,000,000 Amoco Canada Petroleum Co. Ltd.,
6.75%, 2/15/05 1,960,000
1,000,000 BP America, Inc.,
8.875%, 12/1/97 1,030,280
-----------
2,990,280
-----------
PHARMACEUTICALS 2.44%
2,000,000 Eli Lilly & Co.,
6.25%, 3/15/03 1,915,000
-----------
RAILROADS 0.66%
500,000 Southern Railway Co.,
7.75%, 8/1/99 516,250
-----------
RETAIL 5.23%
$2,000,000 J.C. Penney Co., Inc.,
6.00%, 5/1/06 $ 1,815,000
2,500,000 Wal-Mart Stores, Inc.,
5.875%, 10/15/05 2,290,625
-----------
4,105,625
-----------
SOAPS & CLEANING AGENTS 1.92%
1,500,000 Colgate-Palmolive Co.,
6.85%, 11/24/99 1,507,500
-----------
UTILITIES - ELECTRIC SERVICES 6.19%
2,500,000 National Rural Utility Co.,
6.50%, 9/15/02 2,456,250
2,500,000 Union Electric Co.,
6.75%, 5/1/08 2,403,125
-----------
4,859,375
-----------
UTILITIES - ELECTRIC & OTHER SERVICES
COMBINED 6.52%
2,500,000 Citizens Utilities Co.,
7.60%, 6/1/06 2,571,875
1,500,000 Iowa Southern Utilities Co.,
7.375%, 2/1/03 1,522,500
1,000,000 Louisville Gas & Electric Co.,
7.50%, 7/1/02 1,018,750
-----------
5,113,125
-----------
UTILITIES - NATURAL GAS 9.36%
1,000,000 Consolidated Natural Gas Co.,
9.375%, 2/1/97 1,010,000
2,500,000 Indiana Gas Co.,
6.625%, 12/1/97 2,512,500
2,500,000 Laclede Gas Co.,
6.50%, 11/15/10 2,334,375
1,500,000 Northern Illinois Gas Co.,
6.25%, 2/1/99 1,485,000
-----------
7,341,875
-----------
UTILITIES - TELECOMMUNICATIONS 9.03%
2,500,000 AT&T Corp.,
7.75%, 3/1/07 2,587,500
2,500,000 Chesapeake & Potomac Telephone Co.
of Maryland, 5.25%, 5/1/05 2,206,250
1,000,000 Southern Bell Telephone & Telegraph Co.,
4.75%, 9/1/00 920,000
UTILITIES - TELECOMMUNICATIONS 9.03% (CONT'D.)
$ 1,500,000 Southern Bell Telephone & Telegraph Co.,
6.00%, 10/1/04 $ 1,368,750
-----------
7,082,500
-----------
Total Corporate Bonds (cost $54,670,718) 53,508,155
-----------
U.S. GOVERNMENT AGENCIES 2.66%
2,000,000 Federal National Mortgage Association,
8.625%, 11/10/04 2,084,620
-----------
Total U.S. Government Agencies ($1,999,691) 2,084,620
-----------
U.S. TREASURY NOTES 2.66%
1,000,000 8.125%, 2/15/98 1,027,340
1,000,000 8.875%, 2/15/99 1,057,820
-----------
Total U.S. Treasury Notes (cost $2,207,500) 2,085,160
-----------
U.S. TREASURY STRIPS 16.55%
1,785,000 8/15/01 1,310,725
2,122,000 5/15/02 1,479,395
4,983,000 2/15/05 2,849,030
6,513,000 2/15/07 3,222,567
12,114,000 2/15/12 4,126,390
-----------
Total U.S. Treasury Strips (cost $12,029,850) 12,988,107
-----------
U.S. TREASURY BONDS 4.22%
1,000,000 7.875%, 11/15/07 1,064,680
1,000,000 8.75%, 11/15/08 1,109,070
1,000,000 9.125%, 5/15/09 1,137,030
-----------
Total U.S. Treasury Bonds (cost $3,320,625) 3,310,780
-----------
NUMBER
OF SHARES VALUE
---------- -------
INVESTMENT COMPANIES 4.29%
3,364,030 Goldman Sachs ILA Treasury
Obligations Portfolio $ 3,364,030
-----------
Total Investment Companies (cost $3,364,030) 3,364,030
-----------
Total Investments (cost $77,592,414) 98.58% 77,340,852
Other Assets, less Liabilities 1.42% 1,113,930
-----------
NET ASSETS 100.00% $78,454,782
==========
See notes to financial statements.
SCHEDULE OF PORTFOLIO INVESTMENTS
September 30, 1996 (Unaudited)
SHORT/INTERMEDIATE FIXED INCOME FUND
PRINCIPAL
AMOUNT VALUE
---------- -----
CORPORATE BONDS 74.12%
FINANCIAL SERVICES 7.10%
$ 750,000 General Electric Capital Corp.,
6.875%, 4/15/00 $ 754,687
750,000 John Deere Capital Corp.,
7.20%, 5/15/97 755,295
-----------
1,509,982
-----------
FOOD PRODUCTS 4.70%
1,000,000 Anheuser-Busch Cos., Inc.,
6.90%, 10/1/02 1,000,000
-----------
PHARMACEUTICALS 14.02%
1,000,000 Eli Lilly & Co.,
8.125%, 12/1/01 1,058,750
1,000,000 SmithKline Beecham Corp.,
6.625%, 10/1/05 952,500
1,000,000 Upjohn Co.,
5.875%, 4/15/00 972,500
-----------
2,983,750
-----------
RETAIL 4.60%
1,000,000 Wal-Mart Stores, Inc.,
6.50%, 6/1/03 980,000
-----------
UTILITIES - ELECTRIC SERVICES 21.91%
1,000,000 Alabama Power Co.,
5.50%, 2/1/98 990,000
1,000,000 Florida Power & Light Co.,
5.50%, 7/1/99 972,500
750,000 Gulf Power Co.,
5.875%, 8/1/97 748,125
1,000,000 Monongahela Power Co.,
5.625%, 4/1/00 966,250
1,000,000 Union Electric Co.,
6.875%, 8/1/04 986,250
-----------
4,663,125
-----------
UTILITIES - ELECTRIC & OTHER SERVICES
COMBINED 8.98%
1,000,000 Northern States Power Co.,
5.75%, 10/1/03 932,500
1,000,000 Wisconsin Electric Power Co.,
5.125%, 9/15/98 977,500
-----------
1,910,000
-----------
UTILITIES - NATURAL GAS 3.49%
$ 750,000 Northern Illinois Gas Co.,
6.25%, 2/1/99 $ 742,500
-----------
UTILITIES - TELECOMMUNICATIONS 9.32%
1,000,000 Chesapeake & Potomac Telephone Co. of
Maryland, 5.875%, 9/15/99 983,750
1,000,000 GTE California, Inc.,
6.25%, 1/15/98 1,000,000
-----------
1,983,750
-----------
Total Corporate Bonds (cost $15,839,589) 15,773,107
-----------
U.S. TREASURY NOTES 7.51%
650,000 5.125%, 3/31/98 642,044
1,000,000 5.875%, 2/15/04 955,800
-----------
Total U.S. Treasury Notes (cost $1,618,339) 1,597,844
-----------
U.S. TREASURY STRIPS 14.49%
1,085,000 2/15/99 938,688
1,520,000 8/15/00 1,192,759
1,345,000 2/15/02 953,349
-----------
Total U.S. Treasury Strips (cost $3,156,995) 3,084,796
-----------
NUMBER
OF SHARES
----------
INVESTMENT COMPANIES 2.27%
482,779 Goldman Sachs ILA Treasury
Obligations Portfolio 482,779
-----------
Total Investment Companies (cost $482,779) 482,779
-----------
Total Investments (cost $21,097,702) 98.39% 20,938,526
Other Assets, less Liabilities 1.61% 341,861
-----------
NET ASSETS 100.00% $21,280,387
===========
See notes to financial statements.
SCHEDULE OF PORTFOLIO INVESTMENTS
September 30, 1996 (Unaudited)
U.S. GOVERNMENT OBLIGATIONS FUND
PRINCIPAL
AMOUNT VALUE
---------- -----
U.S. TREASURY BILLS 57.06%
$ 5,000,000 10/3/96 $ 4,998,566
5,000,000 10/17/96 4,988,847
10,000,000 11/14/96 9,937,642
10,000,000 12/19/96 9,886,334
5,000,000 12/26/96 4,937,772
5,000,000 1/16/97 4,923,914
5,000,000 1/23/97 4,919,174
5,000,000 2/6/97 4,909,336
5,000,000 2/27/97 4,893,427
5,000,000 3/20/97 4,876,635
5,000,000 3/27/97 4,869,957
-----------
Total U.S. Treasury Bills (cost $64,141,604) 64,141,604
-----------
U.S. TREASURY NOTES 4.44%
5,000,000 4.75%, 2/15/97 4,987,120
-----------
Total U.S. Treasury Notes (cost $4,987,120) 4,987,120
-----------
U.S. TREASURY STRIPS 8.84%
10,000,000 11/15/96 9,935,535
-----------
Total U.S. Treasury Strips (cost $9,935,535) 9,935,535
-----------
REPURCHASE AGREEMENTS 29.99%
17,716,010 G. X. Clarke & Co., 5.50%, dated 9/30/96,
repurchase price $17,718,717, maturing
10/1/96 (collateralized by U.S.
Treasury Notes, 6.25%, 4/30/01) 17,716,010
16,000,000 HSBC Securities, Inc., 5.50%, dated 9/30/96,
repurchase price $16,002,444, maturing
10/1/96 (collateralized by U.S.
Treasury Notes, 5.125%, 11/30/98) 16,000,000
-----------
Total Repurchase Agreements (cost $33,716,010) 33,716,010
-----------
Total Investments (cost $112,780,269) 100.33% 112,780,269
Liabilities, less Other Assets (0.33)% (367,911)
-----------
NET ASSETS 100.00% $112,412,358
===========
See notes to financial statements.
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
SMALL CAP BALANCED
VALUE FUND EQUITY FUND FUND
---------------- ---------------------------------- ----------------
JUNE 10, 1996<F10> APRIL 1, 1996 APRIL 10, 1995<F10> AUGUST 6, 1996<F10>
TO TO TO TO
SEPT. 30, 1996 SEPT. 30, 1996 MARCH 31, 1996 SEPT. 30, 1996
---------------- -------------- --------------- -----------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income $ 11,782 $ 2,601,458 $ 4,439,709 $ 11,664
Net realized gain (loss) on investments - 9,058,658 14,388,259 -
Change in unrealized appreciation (depreciation)
on investments (11,559) 920,224 18,465,419 15,823
----------- ----------- ------------ ------------
Net increase (decrease) in net assets resulting
from operations 223 12,580,340 37,293,387 27,487
----------- ----------- ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income (13,979) (2,583,663) (4,409,736) (10,911)
Net capital gains - - (7,246,838) -
----------- ----------- ------------ ------------
Total Distributions (13,979) (2,583,663) (11,656,574) (10,911)
----------- ----------- ------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sale of shares 2,865,447 17,561,034 48,686,735 2,564,095
Net assets resulting from conversion - - 161,426,537 -
Proceeds from reinvestment of dividends 13,976 2,577,478 11,645,208 10,908
Redemption of shares (9,676) (13,679,945) (23,306,480) (13,900)
----------- ----------- ------------ ------------
Net increase from share transactions 2,869,747 6,458,567 198,452,000 2,561,103
----------- ----------- ------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 2,855,991 16,455,244 224,088,813 2,577,679
NET ASSETS:
Beginning of period - 224,168,813 80,000 -
----------- ----------- ------------ ------------
End of period $2,855,991 $240,624,057 $224,168,813 $2,577,679
=========== ============ ============ ============
Undistributed net investment income, end of period $ (1,605) $ 50,748 $ 31,943 $ 994
=========== ============ ============ ============
<FN>
<F10> Commencement of operations
See notes to financial statements.
</TABLE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<CAPTION>
FIXED INCOME SHORT/INTERMEDIATE U.S. GOVERNMENT
FUND FIXED INCOME FUND OBLIGATIONS FUND
-------------------------------- ---------------------------- ----------------------------
APRIL 1, APRIL 10, APRIL 1, APRIL 10, APRIL 1, APRIL 10,
1996 1995<F11> 1996 1995<F11> 1996 1995<F11>
TO TO TO TO TO TO
SEPT. 30, MARCH 31, SEPT. 30, MARCH 31, SEPT. 30, MARCH 31,
1996 1996 1996 1996 1996 1996
--------- -------- -------- -------- -------- --------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income $ 1,644,273 $ 4,297,993 $ 536,893 $ 1,162,499 $ 2,218,343 $ 4,440,340
Net realized gain (loss)
on investments (62,452) (75,074) (56,002) (109,194) - -
Change in unrealized
appreciation (depreciation)
on investments (204,997) 2,450,307 (70,429) 527,854 - -
----------- ----------- --------- ---------- ----------- -----------
Net increase (decrease)
in net assets resulting
from operations 1,376,824 6,673,226 410,462 1,581,159 2,218,343 4,440,340
----------- ----------- --------- ---------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income (1,732,162) (4,110,469) (563,341) (1,116,807) (2,218,343) (4,440,340)
Net capital gains - - - - - -
----------- ----------- --------- ---------- ----------- -----------
Total Distributions (1,732,162) (4,110,469) (563,341) (1,116,807) (2,218,343) (4,440,340)
----------- ----------- --------- ---------- ----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sale of shares 5,504,867 15,431,739 1,669,431 5,409,677 179,316,683 388,060,722
Net assets resulting
from conversion - 66,377,812 - 22,125,516 - 76,094,844
Proceeds from reinvestment
of dividends 1,724,925 4,090,974 557,900 1,111,654 408,414 1,141,735
Redemption of shares (4,761,591) (12,122,363) (2,849,877) (7,056,387) (155,027,472) (377,600,568)
----------- ----------- --------- ---------- ----------- -----------
Net increase from share
transactions 2,468,201 73,778,162 (622,546) 21,590,460 24,697,625 87,696,733
----------- ----------- --------- ---------- ----------- -----------
TOTAL INCREASE (DECREASE)
IN NET ASSETS 2,112,863 76,340,919 (775,425) 22,054,812 24,697,625 87,696,733
NET ASSETS:
Beginning of period 76,341,919 1,000 22,055,812 1,000 87,714,733 18,000
----------- ----------- ---------- ---------- ----------- -----------
End of period $78,454,782 $76,341,919 $21,280,387 $22,055,812 $112,412,358 $87,714,733
=========== =========== ========== ========== =========== ===========
Undistributed net investment
income, end of period $ 102,615 $ 189,494 $ 22,224 $ 47,662 $ 2,980 $ 1,970
=========== =========== ========== ========== =========== ===========
<FN>
<F11> Commencement of operations
See notes to financial statements.
</TABLE>
<TABLE>
FINANCIAL HIGHLIGHTS <F12>
<CAPTION>
SMALL CAP
VALUE FUND EQUITY FUND
---------- --------------------------------------------------------------------------
JUNE 10, APRIL 1, APRIL 10, JULY 1, DEC. 13,
1996<F13> 1996 1995<F13> 1994 YEAR 1992
TO TO TO TO ENDED TO
SEPT. 30, SEPT. 30, MARCH 31, APRIL 9, JUNE 30, JUNE 30,
1996 1996 1996 1995 1994 1993
---------- --------- --------- -------- -------- --------
(UNAUDITED) (UNAUDITED)
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00 $13.07 $11.39 $10.48 $10.55 $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.04 0.15 0.28 0.21 0.20 0.11
Net realized and unrealized
gains on investments (0.16) 0.57 2.13 1.48 0.15 0.54
-------- -------- -------- -------- -------- --------
Total from investment operations (0.12) 0.72 2.41 1.69 0.35 0.65
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income 0.05 0.15 0.28 0.22 0.20 0.10
Distributions from capital gains - - 0.45 0.56 0.22 -
-------- -------- -------- -------- -------- --------
Total distributions 0.05 0.15 0.73 0.78 0.42 0.10
-------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 9.83 $13.64 $13.07 $11.39 $10.48 $10.55
======== ======== ======== ======== ======== ========
TOTAL RETURN <F14> (1.20)% 5.53% 21.52% 16.48% 3.34% 6.55%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (000s) $2,856 $240,624 $224,169 $161,323 $129,381 $111,059
Ratio of net expenses to
average net assets<F15> 1.59% 1.01% 0.99% 1.03% 1.04% 1.01%
Ratio of net investment income to
average net assets<F15> 1.65% 2.24% 2.32% 2.50% 1.93% 1.90%
Ratio of net expenses to
average net assets<F15><F16> 5.29% 1.06% 1.07% 1.62% 1.54% 1.32%
Ratio of net investment income to
average net assets<F15><F16> (2.05)% 2.19% 2.24% 1.91% 1.43% 1.59%
Portfolio turnover rate<F14> - 11.86% 26.60% 14.36% 15.86% 4.94%
Average commission rate paid on
portfolio investment transactions $0.0700 $0.0700 N/A N/A N/A N/A
</TABLE>
<TABLE>
FINANCIAL HIGHLIGHTS <F12> (continued)
<CAPTION>
BALANCED
FUND FIXED INCOME FUND
--------- ------------------------------------------------------------------------
AUGUST 6, APRIL 1, APRIL 10, JULY 1, DEC. 13,
1996<F13> 1996 1995<F13> 1994 YEAR 1992
TO TO TO TO ENDED TO
SEPT. 30, SEPT. 30, MARCH 31, APRIL 9, JUNE 30, JUNE 30,
1996 1996 1996 1995 1994 1993
---------- --------- --------- -------- -------- --------
(UNAUDITED) (UNAUDITED)
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00 $10.00 $9.63 $9.58 $10.49 $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.05 0.23 0.59 0.51 0.67 0.39
Net realized and unrealized
gains on investments 0.06 (0.12) 0.35 0.07 (0.88) 0.47
-------- -------- -------- -------- -------- --------
Total from investment operations 0.11 0.11 0.94 0.58 (0.21) 0.86
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income 0.05 0.22 0.57 0.53 0.67 0.37
Distributions from capital gains - - - - 0.03 -
-------- -------- -------- -------- -------- --------
Total distributions 0.05 0.22 0.57 0.53 0.70 0.37
-------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $10.06 $9.89 $10.00 $9.63 $9.58 $10.49
======== ======== ======== ======== ======== ========
TOTAL RETURN <F14> 1.05% 1.16% 9.79% 6.35% (2.29)% 8.72%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (000s) $2,578 $78,455 $76,342 $66,488 $61,714 $59,178
Ratio of net expenses to
average net assets<F15> 1.13% 0.86% 0.83% 0.87% 0.86% 0.79%
Ratio of net investment income to
average net assets<F15> 3.34% 4.27% 5.94% 6.98% 6.52% 6.89%
Ratio of net expenses to
average net assets<F15><F16> 4.97% 0.96% 0.96% 1.51% 1.41% 1.19%
Ratio of net investment income to
average net assets<F15><F16> (0.50)% 4.17% 5.81% 6.34% 5.97% 6.49%
Portfolio turnover rate<F14> - 3.29% 37.35% 7.04% 13.09% 2.62%
Average commission rate paid on
portfolio investment transactions $0.0700 - N/A N/A N/A N/A
</TABLE>
<TABLE>
FINANCIAL HIGHLIGHTS <F12> (continued)
<CAPTION>
SHORT/INTERMEDIATE FIXED INCOME FUND
--------------------------------------
APRIL 1, 1996 APRIL 10, 1995<F13> JULY 1, 1994 YEAR ENDED DEC. 13, 1992
TO TO TO JUNE 30, TO
SEPT. 30,1996 MARCH 31, 1996 APRIL 9, 1995 1994 JUNE 30, 1993
------------- -------------- ------------- -------- -------------
(UNAUDITED)
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $9.85 $9.66 $9.62 $10.18 $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.27 0.52 0.42 0.55 0.33
Net realized and unrealized
gains on investments (0.08) 0.17 0.05 (0.56) 0.16
-------- -------- -------- -------- --------
Total from investment operations 0.19 0.69 0.47 (0.01) 0.49
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income 0.26 0.50 0.43 0.55 0.31
Distributions from capital gains - - - - -
-------- -------- -------- -------- --------
Total distributions 0.26 0.50 0.43 0.55 0.31
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $9.78 $9.85 $9.66 $9.62 $10.18
======== ======== ======== ======== ========
TOTAL RETURN <F14> 1.92% 7.24% 5.05% (0.22)% 5.00%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (000s) $21,280 $22,056 $22,130 $21,938 $24,581
Ratio of net expenses to
average net assets<F15> 0.94% 0.89% 0.88% 0.83% 0.79%
Ratio of net investment
income to average net assets<F15> 4.94% 5.34% 5.63% 5.44% 5.91%
Ratio of net expenses to
average net assets<F15><F16> 1.04% 1.02% 1.51% 1.38% 1.19%
Ratio of net investment income
to average net assets<F15><F16> 4.84% 5.21% 5.00% 4.89% 5.51%
Portfolio turnover rate<F14> 4.68% 41.45% 9.93% 20.52% 15.58%
Average commission rate paid on
portfolio investment transactions - N/A N/A N/A N/A
</TABLE>
<TABLE>
FINANCIAL HIGHLIGHTS <F12> (continued)
<CAPTION>
U.S. GOVERNMENT OBLIGATIONS FUND
---------------------------------
APRIL 1, 1996 APRIL 10, 1995<F13> JULY 1, 1994 YEAR ENDED YEAR ENDED DEC. 4, 1991
TO TO TO JUNE 30, JUNE 30, TO
SEPT. 30, 1996 MARCH 31, 1996 APRIL 9, 1995 1994 1993 JUNE 30, 1992
-------------- -------------- ------------- -------- ---------- -------------
(UNAUDITED)
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.02 0.05 0.04 0.03 0.03 0.02
Net realized and unrealized
gains on investments - - - - - -
-------- -------- -------- -------- -------- --------
Total from investment operations 0.02 0.05 0.04 0.03 0.03 0.02
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income 0.02 0.05 0.04 0.03 0.03 0.02
Distributions from capital gains - - - - - -
-------- -------- -------- -------- -------- --------
Total distributions 0.02 0.05 0.04 0.03 0.03 0.02
-------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
======== ======== ======== ======== ======== ========
TOTAL RETURN <F14> 2.35% 5.14% 3.51% 2.74% 2.72% 2.15%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (000s) $112,412 $87,715 $76,105 $89,195 $91,785 $81,152
Ratio of net expenses to
average net assets<F15> 0.57% 0.54% 0.63% 0.60% 0.61% 0.46%
Ratio of net investment income
to average net assets<F15> 4.65% 5.12% 4.46% 2.68% 2.67% 3.65%
Ratio of net expenses to
average net assets<F15><F16> 0.58% 0.59% 1.23% 1.13% 0.96% 0.98%
Ratio of net investment income
to average net assets<F15><F16> 4.64% 5.07% 3.86% 2.15% 2.32% 3.13%
Portfolio turnover rate<F14> - - - - - -
Average commission rate paid on
portfolio investment transactions - N/A N/A N/A N/A N/A
<FN>
<F12> Performance data for each Fund prior to April 10, 1995 relates to a corresponding predecessor First Omaha Fund, the assets of
which were acquired on that date.
<F13> Commencement of operations
<F14> Not annualized
<F15> Annualized
<F16> During the period, certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the ratios would
have been as indicated.
See notes to financial statements.
</TABLE>
<TABLE>
STATEMENTS OF OPERATIONS
For the period from April 1, 1996 to September 30, 1996 (Unaudited)
<CAPTION>
SHORT/ U.S.
SMALL CAP FIXED INTERMEDIATE GOVERNMENT
VALUE EQUITY BALANCED INCOME FIXED INCOME OBLIGATIONS
FUND<F17> FUND FUND<F18> FUND FUND FUND
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 6,984 $1,151,547 $12,020 $1,977,004 $639,460 $2,489,385
Dividends (net of withholding
tax of $0, $0, $0,
$0, $0 and $0, respectively) 16,154 2,630,229 3,569 - - -
---------- ---------- ---------- ---------- ---------- ----------
23,138 3,781,776 15,589 1,977,004 639,460 2,489,385
---------- ---------- ---------- ---------- ---------- ----------
EXPENSES:
Fund administration and
accounting fees 15,343 233,014 7,671 77,097 21,766 95,396
Investment advisory fees 6,071 873,801 2,616 231,291 54,415 119,245
Shareholder servicing fees 5,727 31,857 3,028 17,396 13,593 18,177
Federal and state registration fees 4,729 16,426 570 8,752 5,713 9,292
Professional fees 4,329 15,949 2,420 9,189 6,714 9,383
Amortization of organization expenses 592 3,482 241 3,482 3,482 3,482
Reports to shareholders 433 11,799 278 4,070 1,167 4,591
Pricing fees 348 971 382 2,720 1,748 128
Custody fees 214 34,952 105 11,565 3,265 14,309
Directors' fees 25 5,444 5 1,872 534 2,089
Insurance - 5,077 - 1,721 510 2,021
Other expenses 1 1,255 1 635 133 447
---------- ---------- ---------- ---------- ---------- ----------
Total expenses before waiver 37,812 1,234,027 17,317 369,790 113,040 278,560
Less: Waiver of expenses (26,456) (53,709) (13,392) (37,059) (10,473) (7,518)
---------- ---------- ---------- ---------- ---------- ----------
Net Expenses 11,356 1,180,318 3,925 332,731 102,567 271,042
---------- ---------- ---------- ---------- ---------- ----------
NET INVESTMENT INCOME 11,782 2,601,458 11,664 1,644,273 536,893 2,218,343
---------- ---------- ---------- ---------- ---------- ----------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss)
on investments - 9,058,658 - (62,452) (56,002) -
Change in unrealized
appreciation (depreciation)
on investments (11,559) 920,224 15,823 (204,997) (70,429) -
---------- ---------- ---------- ---------- ---------- ----------
Net Gain on Investments (11,559) 9,978,882 15,823 (267,449) (126,431) -
---------- ---------- ---------- ---------- ---------- ----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 223 $12,580,340 $27,487 $1,376,824 $410,462 $2,218,343
========== ========== ========== ========== ========== ==========
<FN>
<F17> Commenced operations on June 10, 1996
<F18> Commenced operations on August 6, 1996
See notes to financial statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
September 30, 1996 (Unaudited)
1. ORGANIZATION
First Omaha Funds, Inc. (the "Company") was organized in October, 1994 as a
Nebraska corporation and is registered under the Investment Company Act of 1940,
as amended (the "1940 Act"), as an open-end management investment company
issuing its shares in series, each series representing a distinct portfolio with
its own investment objectives and policies. At September 30, 1996, the only
series presently authorized are the Small Cap Value Fund, the Equity Fund, the
Balanced Fund, the Fixed Income Fund, the Short/Intermediate Fixed Income Fund
and the U.S. Government Obligations Fund (individually referred to as a "Fund"
and collectively as the "Funds").
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of their financial statements. These
policies are in conformity with generally accepted accounting principles.
(a) INVESTMENT VALUATION
Securities traded over-the-counter or on a national securities exchange are
valued on the basis of market value in their principal and most representative
market. Securities where the principal and most representative market is a
national securities exchange are valued at the latest reported sale price on
such exchange. Exchange-traded securities for which there were no transactions
are valued at the latest reported bid price.
Securities traded on only over-the-counter markets are valued at the latest bid
price. Debt securities (other than short-term instruments) are valued at prices
furnished by a pricing service, subject to review by the Funds' investment
adviser, First National Bank of Omaha (the "Adviser"), and determination of
the appropriate price whenever a furnished price is significantly different from
the previous day's furnished price. Short-term obligations (maturing within 60
days) are valued on an amortized cost basis. Securities for which quotations
are not readily available and other assets are valued at fair value as
determined in good faith by the Adviser under the supervision of the Board of
Directors.
Pursuant to Rule 2a-7 of the 1940 Act, investments of the U.S. Government
Obligations Fund are valued at either amortized cost, which approximates market
value, or at original cost, which combined with accrued interest, approximates
market value. Under the amortized cost valuation method, discount or premium is
amortized on a constant basis to the maturity of the security. In addition, the
Fund may not (i) purchase any instrument with a remaining maturity greater than
13 months unless such investment is subject to a demand feature, or (ii)
maintain a dollar-weighted average portfolio maturity which exceeds 90 days.
(b) REPURCHASE AGREEMENTS
The Funds may acquire repurchase agreements from financial institutions such as
banks and broker/dealers which the Adviser deems creditworthy under guidelines
approved by the Board of Directors, subject to the seller's agreement to
repurchase such securities at a mutually agreed-upon date and price. The
repurchase price generally equals the price paid by each Fund plus interest
negotiated on the basis of current short-term rates, which may be more or less
than the rate on the underlying portfolio securities. The seller, under a
repurchase agreement, is required to maintain the value of collateral held
pursuant to the agreement at not less than the repurchase price (including
accrued interest). Securities subject to repurchase agreements are held by the
Funds' custodian or another qualified custodian or in the Federal
Reserve/Treasury book-entry system. Repurchase agreements are considered to be
loans by the Funds under the 1940 Act.
(c) ORGANIZATION COSTS
Costs incurred by the Funds in connection with their organization, registration
and the initial public offering of shares have been deferred and will be
amortized on a straight-line basis over a period of five years from the date
upon which the Funds commenced their investment activities. Organization costs
have been allocated equally among the respective Funds or by specific
identification, as applicable. If any of the original shares of a Fund are
redeemed by any holder thereof prior to the end of the amortization period, the
redemption proceeds will be reduced by the pro rata share of the unamortized
expenses as of the date of redemption. The pro rata share by which the proceeds
are reduced will be derived by dividing the number of original shares of the
Fund being redeemed by the total number of original shares outstanding at the
time of redemption.
(d) EXPENSES
The Funds are charged for those expenses that are directly attributable to each
portfolio, such as advisory and custodian fees. Expenses that are not directly
attributable to a portfolio are typically allocated among the portfolios in
proportion to their respective net assets.
(e) DISTRIBUTIONS TO SHAREHOLDERS
The U.S. Government Obligations Fund declares dividends of net investment income
daily. The remaining Funds declare dividends monthly; all of the Funds pay
dividends of net investment income monthly. Distributions of net realized
capital gains, if any, will be declared at least annually. Distributions to
shareholders are recorded on the ex-dividend date.
The character of distributions made during the year from net investment income
or net realized gains may differ from the characterization for federal income
tax purposes due to differences in the recognition of income, expense or gain
items for financial statement and tax purposes. Where appropriate,
reclassifications between net asset accounts are made for such differences that
are permanent in nature. Accordingly, at September 30, 1996, reclassifications
were recorded to increase undistributed net investment income and decrease paid-
in capital in excess of par by $592, $1,010, $241, $1,010, $1,010 and $1,010 for
the Small Cap Value Fund, the Equity Fund, the Balanced Fund, the Fixed Income
Fund, the Short/Intermediate Fixed Income Fund and the U.S. Government
Obligations Fund, respectively.
(f) FEDERAL INCOME TAXES
Each Fund intends to comply with the requirements of the Internal Revenue Code
necessary to qualify as a regulated investment company and to make the requisite
distributions of the income to its shareholders which will be sufficient to
relieve it from all or substantially all federal income taxes.
As of March 31, 1996, each of the U.S. Government Obligations,
Short/Intermediate Fixed Income and Fixed Income Funds had a federal income tax
capital loss carryforward of $16,038, $287,977 and $262,977, respectively. The
entire federal income tax loss carryforward for the U.S. Government Obligations
Fund expires in 2003. The $287,977 federal income tax loss carryforward for the
Short/Intermediate Fixed Income Fund expires as follows: $31,092 in 2002,
$147,691 in 2003 and $109,194 in 2004. The $262,977 federal income tax loss
carryforward for the Fixed Income Fund expires as follows: $187,903 in 2003 and
$75,074 in 2004.
(g) USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported changes in net assets during the reporting
period. Actual results could differ from those estimates.
(h) OTHER
Investment transactions are accounted for on the trade date plus one. The Funds
determine the gain or loss realized from investment transactions by comparing
the original cost of the security lot sold with the net sale proceeds. Dividend
income is recognized on the ex-dividend date and interest income is recognized
on an accrual basis.
3. INVESTMENT ADVISORY AND OTHER AGREEMENTS
The Funds have an agreement with the Adviser to furnish investment advisory
services to the Funds. Under the terms of this agreement, the Funds will pay
the Adviser a monthly fee at the annual rate of the following percentages on
average daily net assets: 0.85% for the Small Cap Value Fund, 0.75% for the
Equity Fund, 0.75% for the Balanced Fund, 0.60% for the Fixed Income Fund, 0.50%
for the Short/Intermediate Fixed Income Fund and 0.25% for the U.S. Government
Obligations Fund. Advisory fees of $5,664, $2,616, $19,274 and $5,441 were
waived in the Small Cap Value Fund, the Balanced Fund, the Fixed Income Fund and
the Short/Intermediate Fixed Income Fund, respectively.
First National Bank of Omaha also serves as custodian and transfer agent for
each of the Funds. The custodian receives compensation from each of the Funds
for such services in an amount equal to a fee, computed daily and payable
monthly, at an annual rate of 0.03% of each Fund's average daily net assets.
Custody fees of $214, $34,952, $105, $11,565 and $3,265 were waived in the Small
Cap Value Fund, the Equity Fund, the Balanced Fund, the Fixed Income Fund and
the Short/Intermediate Fixed Income Fund, respectively. The transfer agent also
receives compensation from each of the Funds for such services. Transfer agent
fees of $5,625 and $3,000 were waived in the Small Cap Value Fund and the
Balanced Fund, respectively.
Sunstone Financial Group, Inc. (the "Administrator" or the "Distributor")
acts as Administrator and Distributor for each of the Funds. As compensation
for its administrative services and the assumption of certain administrative
expenses, the Administrator is entitled to a fee, computed daily and payable
monthly, at an annual rate of 0.20% of each Fund's average daily net assets.
The Small Cap Value Fund and the Balanced Fund are each subject to a $50,000
minimum annual fee. Administrative fees of $14,953, $18,757, $7,671, $6,220,
$1,767 and $7,518 were waived in the Small Cap Value Fund, the Equity Fund, the
Balanced Fund, the Fixed Income Fund, the Short/Intermediate Fixed Income Fund
and the U.S. Government Obligations Fund, respectively.
The Administrator may periodically volunteer to reduce all or a portion of its
administrative fee with respect to one or more Funds. These waivers may be
terminated at any time at the Administrator's discretion. The Administrator may
not seek reimbursement of such voluntarily reduced fees at a later date. The
reduction of such fee will cause the yield of that Fund to be higher than it
would be in the absence of such reduction. The Distributor receives no
compensation from the Funds under its Distribution Agreement with the Company,
but may receive compensation under the Distribution and Service Plan.
4. DISTRIBUTION AND SERVICE PLAN
Pursuant to Rule 12b-1 under the 1940 Act, the Company has adopted a
Distribution and Service Plan (the "Plan"), under which each Fund is
authorized to pay a periodic amount representing distribution expenses
calculated at an annual rate not to exceed 0.25% of the average daily net assets
of that Fund. Such amount may be used to pay banks, broker/dealers and other
institutions, which may include the Adviser, its correspondent and affiliated
banks and the Administrator (each a "Participating Organization") for
distribution and/or shareholder service assistance pursuant to an agreement
between the Distributor and the Participating Organization. As of September 30,
1996, there are no 12b-1 Agreements with any Participating Organizations.
5. ADMINISTRATIVE SERVICES PLAN
The Company has adopted an Administrative Services Plan pursuant to which each
Fund is authorized to pay compensation to banks and other financial
institutions, which may include the Adviser, its correspondent and affiliated
banks and the Administrator (each a "Service Organization"). Such Service
Organizations agree to provide certain ministerial, record keeping and/or
administrative support services for their customers or account holders who are
the beneficial or record owner of shares of that Fund. In consideration for
such services, a Service Organization receives a fee from a Fund, computed daily
and paid monthly at an annual rate of up to 0.25% of the average daily net asset
value of shares of that Fund owned beneficially or of record by such Service
Organization's customers for whom the Service Organization provides such
services. As of September 30, 1996, no fees have been incurred under the
Administrative Services Plan.
6. CAPITAL STOCK
The Funds are authorized to issue a total of 1,000,000,000 shares of common
stock in series with a par value of $0.00001 per share. The Board of Directors
is empowered to issue other series of the Company's shares without shareholder
approval.
Each share of stock will have a pro rata interest in the assets of the Fund to
which the stock of that series relates and will have no interest in the assets
of any other Fund.
<TABLE>
Transactions in shares of the Funds for the period ended September 30, 1996 were as follows:
<CAPTION>
SHORT/ U.S.
SMALL CAP FIXED INTERMEDIATE GOVERNMENT
VALUE EQUITY BALANCED INCOME FIXED INCOME OBLIGATIONS
FUND FUND FUND FUND FUND FUND
------- -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 290,181 1,327,487 256,637 606,267 170,861 179,316,684
Shares issued to holders
in reinvestment of dividends 1,432 195,103 1,086 175,662 57,254 408,414
Shares redeemed (991) (1,031,528) (1,398) (483,430) (291,667) (155,027,472)
-------- ----------- -------- --------- --------- -------------
Net increase (decrease) 290,622 491,062 256,325 298,499 (63,552) 24,697,626
======== =========== ======== ========= ======== =============
</TABLE>
<TABLE>
Transactions in shares of the Funds for the period from April 10, 1995 to March 31, 1996 were as follows:
<CAPTION>
SHORT/ U.S.
SMALL CAP FIXED INTERMEDIATE GOVERNMENT
VALUE EQUITY BALANCED INCOME FIXED INCOME OBLIGATIONS
FUND FUND FUND FUND FUND FUND
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Shares sold - 3,883,570 - 1,516,636 544,882 388,063,353
Shares issued in conversion - 14,178,204 - 6,894,181 2,290,324 76,107,938
Shares issued to holders
in reinvestment of dividends - 919,982 - 403,885 112,230 1,141,960
Shares redeemed - (1,839,548) - (1,181,072) (709,044) (377,600,568)
-------- ----------- -------- ---------- --------- -------------
Net increase - 17,142,208 - 7,633,630 2,238,392 87,712,683
======== =========== ======== ========== ========= =============
</TABLE>
<TABLE>
7. INVESTMENT TRANSACTIONS
The aggregate purchases and sales of securities, excluding short-term investments, for the Funds for the period
ended September 30, 1996 were as follows:
<CAPTION>
SHORT/ U.S.
SMALL CAP FIXED INTERMEDIATE GOVERNMENT
VALUE EQUITY BALANCED INCOME FIXED INCOME OBLIGATIONS
FUND FUND FUND FUND FUND FUND
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Purchases
U.S. Government - - $ 605,982 - - -
Other $2,376,130 $23,392,402 1,469,573 $6,252,456 $ 977,540 -
Sales
U.S. Government - - - - 98,685 -
Other - 22,128,731 - 2,398,150 1,380,000 -
</TABLE>
<TABLE>
As of September 30, 1996, gross unrealized appreciation and depreciation of investments were as follows:
<CAPTION>
SHORT/ U.S.
SMALL CAP FIXED INTERMEDIATE GOVERNMENT
VALUE EQUITY BALANCED INCOME FIXED INCOME OBLIGATIONS
FUND FUND FUND FUND FUND FUND
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Appreciation $ 75,501 $39,708,516 $51,035 $1,431,577 $ 147,958 -
(Depreciation) (87,060) (4,066,953) (35,212) (1,683,139) (307,134) -
-------- ----------- -------- ----------- --------- -----------
Net appreciation (depreciation)
on investments $(11,559) $35,641,563 $15,823 $ (251,562) $(159,176) -
======== =========== ======= =========== ========= ===========
</TABLE>
As of September 30, 1996, the cost of investments for federal income tax
purposes is substantially the same as for financial statement purposes.
INVESTMENT ADVISER AND CUSTODIAN
First National Bank of Omaha
Attention: Trust Division
One First National Center
Omaha, Nebraska 68102
ADMINISTRATOR AND DISTRIBUTOR
Sunstone Financial Group, Inc.
207 E. Buffalo St., Suite 400
Milwaukee, Wisconsin 53202
LEGAL COUNSEL
Cline, Williams, Wright, Johnson & Oldfather
13th & M Streets
Lincoln, Nebraska 68508
AUDITORS
KPMG Peat Marwick LLP
Two Central Park Plaza, Suite 1501
Omaha, Nebraska 68102
This report has been prepared for the general information of First Omaha Funds
shareholders. It is not authorized for distribution to prospective investors
unless accompanied or preceded by an effective First Omaha prospectus. The
prospectus contains more complete information about First Omaha Funds'
investment objectives, management fees and expenses, risks and operating
policies. Please read the prospectus carefully before investing or sending
money.
For more INFORMATION
call 1-800-OMAHA-03
or write to:
First Omaha Funds
P.O. Box 419022
Kansas City, Missouri 64141-6022
